Entrepreneurs plump for friends, not family

2005

Entrepreneurs are shunning family members when setting up a business and increasingly setting up new ventures with friends rather than relatives.

This shift away from the traditional dominance of family businesses in the UK has been highlighted in a survey by Venture Finance which has found that almost seven out of 10 (67 per cent) of small firm owners would prefer to set up a new enterprise with friends instead of family.

The report also reveals around half of entrepreneurs have started up with friends in the past, compared to only a quarter who have run a company with relatives.

Venture Finance said the results demonstrate that the face of small businesses in Britain is changing.

Currently, family-run companies still make up six out of 10 of the country's SMEs. But as research from the Institute for Family Business has found, family firms often fail to endure beyond the third generation because of boardroom disagreements about succession, family relationships and governance, which together are responsible for more than half of the conflicts in family-owned SMEs.

The Department of Trade and Industry's Small Business Service (SBS) also warned last year that family business faced growing succession planning issues as family members are less willing to join family businesses.

Steve Wedsdale, director of Venture Finance, said: "In our opinion, one reason for the change from family to friendship-run businesses is that entrepreneurs now have far more funding options than before.

"This accessibility to finance is supporting more people in their desire to run their own company. It also removes previous reliance on other family members and creates more diverse business partnerships."